The opening chapter of Graeber’s Debt, the last 5000 years is called “on the experience of moral confusion.” For Graeber, the moral confusion arose at a garden party when, having recounted the egregious sins of the IMF in the developing world, a girl he’d just met apparently replied, “they’d borrowed the money! Surely one has to pay one’s debts.”
Consider this everyday scenario. I buy some land, borrow some money against the property and build a house. I pay the builder the borrowed money then spend the next 15 years paying back the bank. Of the $200,000 I borrowed, the bank gets back the principal in full and erases its existence, plus $150,000 in interest which I have attained by working, and which the bank counts as its profit. Then, some years later, I put the house on the market, and a young couple buys it. Being young they borrow $500,000 against the value of the house and the deed of the property goes back to the bank. Over the 25 year term of the loan the couple slave and scrape to return the principal which is destroyed plus, let’s say, $350,000 in interest. The bank has taken $500,000 hard earned dollars as profit, but what is its material contribution?
To say the bank has risked nothing is true in two ways. Firstly, the universal requirement to provide real wealth collateral of equal or greater value in exchange for financial credit (money) means the bank can always recoup the money value of the loan in case of default, with the police to carry out their claim if necessary. Secondly, and more importantly, the money which the bank provides, it gets for nothing.1 This is the meaning behind Galbraith’s famous line, “The process by which money is created is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent.”2
From Douglas’ point of view:
The essence of the fraud is the claim that the money that they create is their own money, and the fraud differs in no respect in quality but only in its far greater magnitude, from the fraud of counterfeiting.
(…)
May I make this point clear beyond all doubt? It is the claim to the ownership of money which is the core of the matter. Any person or any organization who can create practically at will sums of money equivalent to the price values of all the goods produced by the community is the virtual owner of those goods, and, therefore, the claim of the banking system to the ownership of the money which it creates is a claim to the ownership of the country.3
The scenario above should highlight the relative positions of the community who own and create the real credit (goods and services) on the one hand, and the banks who are empowered to monetize it on the other. “Since the banks do not create the real credit, they can make no legitimate claim as to its ownership.”4 In other words the solution to our moral confusion about debt is to realise that “Ethically, there is every difference between money created at the stroke of a pen and money acquired as the result of years of effort”.5
If you consider that the way money is made guarantees that debt can never be repaid, since the money to cover interest charges is never made and so is always in excess of that which is created by borrowing, you will quite clearly see the trap we are in. The interest charges on debt can only be covered by taking on more debt from the same source, that is the financial industry.
To take it further still, combine the mounting debt crisis with a population which won’t make the night without money and we have roughly sketched a plan for a global dictatorship by finance. Add to this Central Bank Digital Currencies (CBDCs) Radio frequency identification (RFID) implants and the rest of the paraphernalia of the surveillance state and it is simply a matter of time before “the virtual owner” becomes the actual owner.
If you think I go to far you probably don’t know that the government wrote incentives in to the 2023 budget to grow the ‘build to rent’ sector:
Build to rent’ (BTR) is the process whereby developers and their financiers build multi-unit buildings and, instead of selling the units, retain them to rent to tenant households…As announced in the 2023 Federal Budget the Australian Government is encouraging investment in BTR, in particular through the reduction of withholding tax penalties for international investors who use managed investment trusts for investing in BTR.6
This process is already well-advanced in the UK and US. Lloyds Bank, the UK’s largest mortgage lender has been buying residential property for years and is planning to own 50,000 rental homes by 2030 7. And they’re not even building them all either. The natural progression of BTR is that before long, if we aren’t there already, Australians will be competing against “financers” and “international investors” in the housing market. That’s what we call a poor bargaining position
What can be done about it. Well, we are so utterly and hopelessly conditioned by the bean counters that the answer is probably nothing. But to those of you who are clear-eyed about the problem I offer the following possibilities for consideration.
Challenge the practice of charging interest on all money. Somebody has to issue the money but they’re nothing more than accountants, and accountants, last time I checked, are paid a flat rate for service. If the bankers don’t like it and wish to continue making obscene profits at the community’s expense, they can join the rest of the decent criminals who don’t hide their crimes behind bullshit slogans and insipid philanthropy (Banks caring about aboriginal people was a high point for me).
I’m not saying interest is the fundamental problem. It would do nothing about rectifying the price system but it would keep credit longer in the market where ordinary people buy bread and milk and significantly reduce living costs for 75% of the population. It would also take the absurd profits out of the banking game, making it a less attractive option for the vampire squids.
A practical avenue worth exploring is the Parliament could under Part 5 of The Constitution establish a lending service which would bring some real competition into the sector. The parliament is permitted to make laws pertaining to:
(xiii) banking, other than State banking; also State banking extending beyond the limits of the State concerned, the incorporation of banks, and the issue of paper money;8
A facility such as this could focus on administering interest free loans to people looking for a home to live in. Surely, universal home ownership is a cause we can all rally around. Surely, it’s preferable to making Australians subject to “professional BTR managers” who might decide to allow tenants to “keep a domestic animal as a pet or make aesthetic changes to apartments (such as changing wall colours).”
If I can be allowed one more digression to plant this seed; we need to seriously start talking about clean slates or at least significant debt cancellations. If our conception is correct and our money, issued as the property of bankers, is an illegitimate usurpation of the real credit I see no reason why we have to keep slogging our guts out to pay it all back.
We could begin by rolling back debts on residential property as a start. The Jews are supposed to do it every seven years, though only for other Jews, Solon did it with his “Shaking off of Burdens”, Ned Kelly did it at Jerilderie and he didn’t even need to shoot the banker. Graeber reports that “faced with the potential for complete social breakdown, Sumerian and later Babylonian Kings periodically announced general amnesties” and apparently successful peasant revolts from China to Europe were often accompanied by the cancellation of debt and the redistribution of land. 9
This is the point we are at. It is not inconceivable that our general insolvency could be used to justify a more aggressive assault on private property – “well you don’t own it anyway” they might say “the banks do. Look at your debt.” If by that time we had resolved the moral confusion around debt in our time, by understanding it as the illegitimate claim of finance to everything, we might feel more confident about standing against it.
Take a leaf out of Solon’s book:
The land which was enslaved, I made free. I brought back to their heaven-built fatherland of Athens many who had been sold as slaves, justly or unjustly, and many who for their debts had been driven to exile and had almost forgotten their native speech from wandering abroad so long. And those who here endured cruel slavery and trembled at the harsh temper of a master I restored to liberty.10
1. Bank of England Website. 2023. How is Money Created. Available at https://www.bankofengland.co.uk/explainers/how-is-money-created. Accessed 19.11.23
2. Galbraith, J. K. 1975. Money, Whence It Came, Where It Went. Boston, Houghton Mifflin.
3. Douglas, C.H. 1978. Dictatorship by Taxation. The Institute of Economic Democracy Publication, Vancouver.
4. Heydorn O.H. 2014. Social Credit Economics. Create Space Independent Publishing, Ontario.
5. Douglas, C.H. 1933. The New and the Old Economics. The Lothian Publishing Co, Melbourne.
6. AHURi Research. Aug. 2023. What is Build to Rent? Available at: https://www.ahuri.edu.au/analysis/brief/what-build-rent. Accessed 19.11.23
7. Lloyds Bank Aims to be a Large UK Landlord with 50,000 homes.
8. The Austalian Constitution. Part V, s51. Accessed 20.11.23
9. Graeber, D. 2011. Debt: The First 5000 Years. Melville House Publishing, London.
10. De Sélincourt, A. 1962. The World of Herodotus. Little Brown and Company Limited, Canada.